Accretion of fresh NPAs has virtually stopped, says Bibek Debroy

Bibek Debroy
Economic Advisory Council to the Prime Minister (EAC-PM) Chairman Bibek Debroy on Wednesday said the accretion of fresh non-performing assets (NPAs) of public sector banks (PSBs) had virtually stopped.

Participating in a discussion on the Union Budget, Debroy said it was possible to scrap income tax and other direct taxes and replace them with indirect taxes, but indirect taxes could never be progressive.

Referring to the issue of low income tax collection, he said it was mainly because farm income was not taxed in India.

Debroy also regretted that not many experts argued in favour of taxing farm income, at least above a certain threshold.

“Fresh cases of NPA creation has virtually stopped. Many NPA figures are floating, I think India’s bank NPA is not more than Rs 3 trillion,” he said.

However, according to recent Reserve Bank of India data, bad loans of PSBs stood at Rs 7.34 trillion at the end of second quarter this financial year, a bulk of which came from corporate defaulters.

Replying to a query on direct taxes, Debroy said that it was perfectly possible to scrap income tax and other direct taxes.

“Although in poor countries like India, it is easier to monitor indirect taxes. But indirect taxes can never be progressive," he noted.

Referring to issue of low income tax collection, the chairman of EAC-PM said, "One reason is that the number of personal income taxpayers is so low is because the rural sector is completely out of purview of income taxation. It is a state subject, so the Union government can not do anything.”

“But the the question I am asking is how many of us are arguing that tax should be levied and if such a tax is levied, then obviously, it should be levied above a certain threshold,” he stressed while referring to farm income taxation.

Debroy also said that fiscal profligacy had its cost.

He pointed out that fiscal deficit for the current financial year was higher because the goods and services taxes (GST) could be counted only for 11 months. “Had it not been, fiscal deficit would have been closer to 3.2 per cent of GDP this fiscal,” he stressed.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel